Tuesday 16 March 2021

Week to Mar 12th

Rotation every day, New highs in SPX/DJI/BTC, New 13m high in yields

This week, unrelated to daily news, we saw the rotation between industrials and tech reach a frenzy with well over 1% variance between NDX and DJIA every day, but each day different, against an overall move up. NDX bounced firmly off the psychological 10% pullback point, but value bulls, encouraged by recent months after years of despair, won the week, and sent the DJI/NDX at one point to 2.59, a level not seen for nine months, and ATR (a measure of volatility) to a level not seen since for nearly a year. DJI and SPX both made new ATHs this week. Note however, that the ratio has a long way to go to reach its 9.38 level after the dotcom crash of 2000. Note also we are starting to see some use of DAX instead of DJIA as the “non-tech” proxy. The German index is the same size, and holds broadly similar sector weights to DJIA, save that DAX has an even smaller tech sector.

Elsewhere in asset class land, consolidation reigned. Although not quite full inside weeks, yields, DXY, Gold and Oil, all finished inside last weeks range, and none appeared to exhibit pivots or reversals. A hawkish BoC and jobs beat added 1.39% to a lacklustre loonie (the only currency to move more than 1%), whereas a non-committal ECB hardly moved EUR. The only other macro print of note, the US inflation miss (1230 Wed) actually caused a spike up in SPX, as inflation appears to join NFP as “bad news is good for QE”, supported by a noticeable dollar spike down for an hour. BTC made another ATH pushing through $60k.

Monday March 8

There was a strong rally out of tech today, pushing DJIA up and NDX sharply down nearly 3%, into 10%+ correction territory. The rotation out of tech enormously benefited the near tech-free DAX which rallied over 3%. So a near 6% divergence in two major indices. The dollar was sharply up, continuing last weeks rally, which pushed Gold down. Yields stayed up at Friday’s high level, around 1.6%, whereas Oil gave up a little of its recent gains.

Tuesday March 9

A definite turnaround Tuesday, as NDX bounced strongly off its 10% correction support, and added 4.03% on the day, against a flat DJIA. TSLA was up 20%. It was a turnaround for USD, which fell in line with the risk-on mood across the board. Gold and yields also reversed down. Only Oil posted the same colour candle as Monday as it continued to fall.

Wednesday March 10

The $1.9tn stimulus package was finally passed today, but the miss on US inflation at 1230 punctured Tuesday’s optimism and we saw a similar situation to Monday, with DJI outperforming NDX making a new ATH, although the effect was more muted. Yields and the dollar did not specifically react to the CPI print, but continued their downward trajectory. Gold and Oil rose in line with the falling dollar. A hawkish BoC trigged a rise in CAD which continued to the end of the week.

Thursday March 11

The 5.8% SPX correction was technically over today as the SPX made new intraday and closing all-time highs, as did DJI. NDX outperformed again, although the tech index remained 5.5% off its Feb 16 high. The safe haven dollar fell across the board, except for JPY which fell further in line with the mood. The ECB made little difference to EUR, eg EURGBP was flat. Oil was up in line with equities. Gold and bonds were flat on the day.

Friday March 12

Today President Biden announced an acceleration of the vaccination program. Yields rose again, touching 1.62%, a new 13-month high. The bond collapse was matched with new all-time highs in SPX and DJIA, yet NDX fell again, as investors looked to buy a post-COVID world. Markets were helped by a strong beat (83 vs 78) in the Michigan CSI reading. The dollar broke a three-day fade and perked up, although not against CAD which hit a new 3-year high after the Canadian jobs beat. Gold and Oil were flat.


The star index of the week was traditional value-led DAX, up 4.18%, slightly beating DJIA. The top forex mover for the second week was CADJPY up another 1.93%. Cryptos resumed their upward trend, with BTC making new highs, breaking the $60k barrier. FANGs were quiet, and broadly moved in line with NDX.

I could not have got it worse, CADJPY was the worst one to short for a second week. I lost 1.93% and my running total is now -2.35% with 6/10 wins. There seems no end to JPY’s weakness so I will buy USDJPY this week.

Note we use Google Finance data for daily movements, listing UUP as a proxy for DXY. All references to ‘the dollar’ are based on DXY. The equity and index prices are now based on the cash close each day.

NEXT WEEK (all times are GMT)

(Calendar High volatility items are in bold)

  • US, UK, Japan Rate Decisions
  • US DST starts
  • Canada inflation and Retail Sales
  • OpEx Week

Monday March 15

No significant European or US news for the start of the week. There is a Eurogroup meeting all day. Markets are closed in Mexico. DST is the US starts today so for two weeks, the US will be out of sync (starting one hour earlier) than Europe.

23:15 RBA Governor Lowe speech (Sun)

02:00 China Industrial Production (YoY)(Jan)

02:00 China Retail Sales (YoY e32% p4.6%)

Tuesday March 16

US Retail Sales is the headline today. There is EcoFin Meeting all day. There is a rate decision in Romania.

00:30 RBA Meeting Minutes

10:00 Germany ZEW Economic Sentiment(Mar)

12:30 US Retail Sales (Control Group e-1.2%, p6.0%)

23:30 RBA Kent speech

23:30 Aus Westpac Leading Index (MoM)(Feb)

23:50 Japan Imports/Exports/TB

Wednesday March 17

An interest rate hold is 100% priced today, but watchers will, as always, be looking for changes in the degree of easing, now the pandemic seems to be at last under control. There is a rate decision in Brazil. Markets are closed in Ireland for St Patricks Day.

10:00 Eurozone CPI

12:30 US Building Permits/Housing Starts (MoM)(Feb)

12:30 Canada BoC CPI (Core YoY e1.4% p1.6%)

18:00 Fed Rate Decision/Statement (e0.25% hold)

18:30 FOMC Press Conference

Thursday March 18

Attention turns to the UK’s rate decision today, given the country’s outperformance in vaccinations, especially the speech from Uber-hawk Chief Economist Andy Haldane 30 minutes after Governor Bailey. There are rate decision in Norway, Turkey and Egypt.

00:30 Aus NFP/UnEmp (NFP p29.1k)

01:05 RBA Kent speech

10:00 Eurozone Labor Cost(Q4)

11:00 BoE Cunliffe speech

12:00 BoE Rate Decision/Statement (e0.1% hold)

12:30 US Jobless Claims

12:30 Philly Fed Mfr Survey(Mar)

12:30 BoE Haldane speech

12:30 Canada New Housing Price Index

23:30 Japan National CPI

Friday March 19

The third major rate decision of the week comes from Japan. There is no significant news but it is OpEx day today. There is a rate decision in Russia.

00:30 Aus Retail Sales (MoM e0.4% p0.5%)

03:00 BoJ Rate Decision/Statement (e-0.1% hold)

06:00 BoJ Press Conference

07:00 Germany PPI

12:30 Canada Retail Sales (MoM e-2.5% p-3.4%)

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